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Small and medium-sized UK companies could save up to 3 per cent if they paid Chinese suppliers in renminbi, rather than dollars, according to a foreign exchange dealer.

Western Union Business Solutions began offering renminbi payment options last year but has reported low uptake from UK businesses. Currently, 97 per cent of payments made to China through the dealer are in US dollars.

More than a third of 1,000 Chinese companies surveyed by WUBS said that they would prefer to be paid in their own local currency. But WUBS believes that cultural differences are making Chinese suppliers reluctant to ask their overseas partners to change their business practices.

HSBC says that some of its UK clients have started to invoice in renminbi, but that this is “the tip of the tip of the iceberg”, according to David Pavitt, head of emerging markets foreign exchange trading.

Not all Chinese companies are able to invoice overseas partners in renminbi, since they must first get approval to do so from the Chinese authorities.

Many Chinese companies bump up the dollar cost of the goods they sell to foreigners to compensate for the widely expected prospect that the dollar will continue to depreciate against the renminbi. HSBC says that some companies will offer a discount of as much as 8 per cent if they are paid in renminbi.

Chinese companies can also improve their cash flow by being paid in renminbi, since the Chinese authorities take about a week to process foreign currency payments but only a day for renminbi ones.

For British companies, however, the drawback of paying in renminbi is that they must take on the foreign exchange risk of the Chinese currency. That would be good for WUBS and other currency dealers, because it would give the company the opportunity to sell hedging products linked to the renminbi.

Foreign companies cannot access financial markets in mainland China, so they can hedge their renminbi forex only in the small and illiquid offshore market in Hong Kong.

Rana Harvey, managing director at Dazzling Dummies, which supplies mannequins from its headquarters in York in the UK, imports parts from 15 Chinese companies.

“It definitely would be an advantage to start paying in renminbi,” she says. “The Chinese suppliers tend to raise prices in dollars. I know that some Chinese companies do offer favourable rates [for invoices in renminbi] as they don’t have bank charges.”

At present, Ms Harvey pays her suppliers in dollars and does not hedge that currency risk against sterling.

Ms Harvey is hoping that if her suppliers offer to invoice in renminbi, an agreement can be reached to split the cost of any appreciation.